In Face Of Approximately $30 Million Jury Demand, CM Convinced Jury To Award Plaintiff Only $270,084
July 11, 2007
Stacker/Reclaimer Accident
Clausen Miller partners James M. Hoey and Thomas S. Gozdziak obtained a very favorable result for client Three Rivers Insurance Company after a 3 week jury trial in the U.S. District Court for the Western District of Pennsylvania. The case involved the 2001 collapse of a large piece of machinery called a stacker/reclaimer which was used at the plaintiff's bauxite mining & shipping operation located in Guinea, West Africa. Bauxite is the raw material used to make aluminum.
Plaintiff Compagnie des Bauxites de Guinee ("CBG"), is owned by the Government of Guinea and a number of leading international aluminum producers. CBG's bauxite mining operations were insured under Alcoa's global all risk property insurance policy. The insurance policy provided that losses involving production machinery would be valued on the basis of the "cost to repair or replace new." CBG made a business decision to replace the stacker/reclaimer following the collapse, and took the position that it was entitled to reimbursement from the insurer for the entire replacement cost of the machine plus alleged business interruption losses through the time when the replacement machine became operational. Three Rivers took the position that the stacker/reclaimer was capable of being repaired to its pre-loss condition, and that valuation under the policy was thereby limited to the theoretical repair cost and business interruption losses sustained during the theoretical repair period.
On the eve of trial, we obtained favorable rulings from the court which gave Three Rivers the momentum heading into the trial. The court found the insurance policy to be clear and unambiguous. The court ruled that the determination of whether the proper basis for measuring the loss under the policy is "cost to repair" or "cost to replace new," will turn on the jury's determination of whether the machine could have been repaired to its pre-loss condition. The court rejected the plaintiff's argument that the jury should instead be asked whether it was more "commercially reasonable" to replace the machine rather than repair it.
In Phase I of the trial, the jury determined that an attempted repair of the stacker/reclaimer would have returned the machine to its pre-loss condition. As a result, plaintiff was limited to seeking damages in Phase II of the trial based upon a repair cost measure of the loss. In Phase II, CBG asked the jury for an award of $26 million new money including $16.5 million for business interruption losses. The jury awarded CBG only $270,084.
The Federal Courtroom in which the case was tried was equipped with the latest audio-visual equipment available, which was used by us in successfully presenting the case. We also utilized our in-house technology resources such as Concordance, Summation and TrialDirector software programs in marshaling the evidence.
Litigation of the case lasted over 3 years and included depositions in England, Germany, France and South Africa. At trial, we utilized the expert testimony of a metals economist, a mining engineer and an accountant to explain to the jury that the decrease in bauxite shipments experienced by CBG following the collapse was due to a downturn in the alumina market and other unrelated production problems experienced by CBG -- and not due to the absence of the stacker/reclaimer following the collapse. We also utilized the expert testimony of a South African engineer and an American engineer to establish the repairability of the machine and the reasonable estimated cost to repair. Please contact Jim Hoey at jhoey@clausen.com if you desire further details about the case.
